Underpayment Risks

It’s not just high-profile companies being caught underpaying. By Emma Watt

Have you been living under a rock?* No? Then it’s likely that media reports have made you aware of a number of high-profile employers who have been prosecuted by the Fair Work Ombudsman for various breaches of the Fair Work Act 2009.

And it’s not just large companies and high-profile individuals who have been caught. The table below shows a sample of litigation outcomes achieved by the Fair Work Ombudsman in 2019.

Many businesses subject to these penalties are no longer going concerns.

That said, sometimes it’s not that easy to work out if you’re doing the right thing with your employees. Sure, you can agree on a pay rate – that’s pretty simple. But what about overtime, penalty rates, shift allowances, casual loading?

Correct award

The first challenge is, are you looking at the correct award? Unless you’re a sole trader or a partnership in Western Australia, or you have an approved enterprise agreement in place, employees are going to be covered by a modern award.

The Timber Industry Award 2010 (Timber Award) is likely to cover most of your employees, however, one or more of the following awards may also cover work performed in your business:

Road Transport and Distribution Award 2010 for drivers not covered by the Timber Award;

Clerks – Private Sector Award 2010;

Commercial Sales Award 2010, for salespeople who travel around visiting customers; and

Building and Construction General On-site Award 2010, which may be relevant for truss rectification work.

Sole traders and partnerships in WA will need to check relevant awards at www.wairc.wa.gov.au.

It’s important that you have access to a copy of each of the relevant awards. For a start, you are required to have a copy of each relevant award and the National Employment Standards available to employees, either in hard copy or electronically, whichever method makes them more easily accessed by employees.

Each award is different, and those differences can be critical. Some of the key areas where you need to check specific provisions include:

• When ordinary hours can be worked, although the upper limit of 38 ordinary hours per week will be consistent.
• Provisions for when overtime is paid– some awards require payment of double time overtime earlier than others.
• Whether or not casual employees have to be offered conversion to full time or part time work.
• Allowances – what type, when they’re paid, and how much is paid.
• Whether penalty rates apply for working ordinary hours at particular times, or on specific days – e.g. under the Timber Award, an employee can agree to work ordinary hours on a Saturday, and the penalty is time and a half for the whole shift, instead of the Saturday overtime penalty of time and a half for the first two hours and double time thereafter.
• What penalties casual employees get – e.g. in the Building Award, a casual working overtime is entitled to the casual loading plus the overtime penalty, so time-and-a-half overtime for a casual would be paid at time and 75%; whereas the Timber Award requires casuals working overtime to get the overtime penalty compounded on the casual rate, so time and a half overtime is applied to the casual rate, or T1.25 x 1.5 = T1.875.

Record keeping and payslips

Another common requirement that seems to trip employers up is failing to keep correct records, or issue compliant payslips.

The Fair Work Ombudsman has an excellent Record Keeping & Payslips Fact Sheet available at www.fairwork.gov.au, in the Templates and Guides section of the website. It summarises your obligations and provides a clear list of the types of information you have to keep, and what must be included on a payslip.

A common question from employers is, do you have to give a payslip if an employee doesn’t want it? The answer is yes, you are definitely obliged to give an employee a payslip, either in hard copy of electronically. Perhaps if an employee doesn’t want a hard copy payslip they might prefer it to be emailed? Providing a payslip by email also helps you prove that you complied with the legislation.

Type of engagement

Finally, the Fair Work Ombudsman will also prosecute employers who engage in sham contracting. If you engage contractors who are sole traders, please seek some professional advice about whether they are truly contractors rather than employees.

Where to go for advice?

If you are a member of an employer association that has access to an advisory service, contact your association.

You can access a lot of information free of charge at www.fairwork.gov.au.

Or you can engage a consultant, who will provide you with tailored advice for a fee. Consultants have to eat too!

*If yes, what’s it like and do you have room for one more?

Emma Watt is an independent industrial relations consultant who has, for more than 20 years, provided advice and assistance to employers in the timber industry. She has also worked as an unfair dismissal conciliator with the Fair Work Commission. Emma is very keen to ensure that employers know their rights and obligations, so they can sleep well at night!